BEML stock gains more than 18% as divestment plan picks up pace

08 Mar , 2021 By : kanchan Joshi

BEML Ltd remains in focus, with the government's stake sale in the organization picking up pace. The stock gained more than 18% on Monday as new reports suggested competition building up among multiple players to buy the government’s 26% stake in the firm. On Friday, the company had also announced the appointment of a consultant to advise, undertake and implement the demerger of non-core assets as part of BEML's disinvestment process undertaken by the government of India.

The company has a strong presence and remains among leading metro rail coach manufacturers. The strong order book, which is growing, provides long-term growth visibility. Besides, its expertise in manufacturing earth-moving equipment, which are extensively used in the metal and mining segment, among others, and growing orders in the defence segment, keep the company’s prospects firm.

During the December quarter, BEML had seen strong order inflow of about Rs1,730 crore (up 49% year-on-year). While its order flow was boosted by Rs760 crore with the ministry of defence's order for high mobility vehicles to be executed within one year, it had received an order worth ?500 crore from Delhi Metro Rail Corporation for 12 additional train-sets of 6 cars each, which is to be supplied by FY24. The governments initiative on “Atmanirbhar Bharat" is likely to benefit and drive order book and prospects for companies such as BEML.

The regular large order inflow has led the company to build a robust order book of Rs11,620 crore providing visibility of up to 4.1x its trailing twelve months revenue say analysts. Metro coaches order worth Rs4,700 crore forms a large part of an order book and is scheduled to start getting delivered from 4QFY21 which will lead to strong revenue growth over the next two years, said analysts at Antique Stock Broking Ltd.

With regular order wins and a strong order book, their execution definitely holds the key. However, while on a sequential basis the revenue and profit volatility may be seen, experts feel that on an annualized basis earnings growth will remain robust.

The execution of Mumbai Metro order and Sarvatra bridging system over FY21-23, strong inflow pipeline in rail, metros and defence owing to focus on indigenization, and incremental orders for large-size mining equipment in coal, cement and steel, bode well for growth. Against this backdrop, analysts at Elara Securities (India) Pvt. Ltd expect an earnings growth of 43% annually over FY20-23 and return on capital employed of 6% over FY21-23 (vs 6% over FY17-20).